Blockchain Association, DeFi Education Fund warn that SEC's consolidated audit trail poses privacy concerns
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The Blockchain Association and the DeFi Education Fund say the U.S.
Securities and Exchange Commission's newly operational database poses privacy concerns for millions and could loop in digital assets.
The SEC adopted Rule 613 in 2012 following the financial crisis, requiring national securities exchanges and the Financial Industry Regulatory Authority to maintain a consolidated audit trail, or CAT. The goal is to allow regulators to oversee securities markets on a "consolidated basis," said former SEC Chair Jay Clayton in 2017.
The Consolidated Audit Trail became fully operational at the end of May 2024, according to the Securities Industry and Financial Markets Association.
The 351-page rule does not explicitly mention digital assets, but both crypto groups say the SEC believes that many crypto participants are exchanges or brokers, so they will have to report information to the CAT.
The CAT will turn "blockchains into a massive and fully deanonymized repository for the government to search at will, without any need to show cause to obtain a warrant," the groups said in an amicus brief filed on Thursday.
"Due to the nature of blockchain technology, accessing even one superficially limited identity record will unlock an unprecedented trove of unrelated financial transactions conducted by that user – past, present, and future – all open for inspection by the federal government, and a host of private parties," they said in the brief.
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